Renesas still struggling with restructuring plan

TOKYO – While the merger of Japan’s largest chip companies has yet to materialize, negotiations continue among Renasas, Panasonic and Fujitsu Semiconductor, according to the latest reports here.

Nikkei Shimbun, Japan’s economic journal, reports that the current plan calls for the three chips makes to join forces to create a new company focusing on the system LSI business while Renasas retains its profitable MCU business.

First, ailing Renesas must make drastic cuts. The proposed restructuring must be big enough to have a meaningful impact on its profitability while at the same time convincing the financial community that it has its house in order. The Renesas spokeswoman confirmed this week that Renesas President Yasushi Akao is scheduled to announce the company's new business strategy during its quarterly financial release in July.

Second, Renesas reportedly needs substantial financing before it can pull off the drastic restructuring. NEC, Hitachi and Mitsubishi, the three major Renesas shareholders, are reportedly being asked to help with financial assistance. Kenichiro Yamanishi, president of Mitsubishi Electric, said earlier this week: “If we receive an official request [for additional financing] from Renesas, we will discuss the matter together with Hitachi and NEC.” Meanwhile, both Hitachi and NEC have each made it clear they have no intention to offering additional financing to Renesas.

Therefore, it appears Renesas – which has promised a major restructuring over the last two years but has yet to deliver – again stands at a crossroads, fighting for its survival.

Agree that the management should be changed! In fact there had been changes for so many times, from M to H...and this time round N?!!! This is not the point! These companies had long been in the RED before the merger, so what made these internal management so great to lead the company? The merger is a good chance for the company to revamp, but after so many years, what it did was just rotating management team, which had been accumulating since 2 mergers. Operators, engineers, old employees had left...but management team is still as hugh, making decision much tougher. Will the No 1 MCU - Renesas be another Nokia? loosing market share without knowing ... ?! Will Renesas bring in a good western CEO, just like Nissan case? Can Renesas break the traditional Japan culture, so to lead in the global scene? or will there be another Olympus scene, whereby the CEO cannot gel well with the boards? or perhaps northing but another merger, will happen again.

Fujitsu Microelectronics was strong in networking and communications, NEC Electronics (now Renesas) was strong in consumer electronics, Mitsubishi was arguably strong in mobile communications. Panasonic had a lot of innovation in audio and visual technologies. Mobile products does not encompass all of these.

Renesas needs to cut at least 20~25%, and many of its unprofitable or non-competitive products in order to remain competitive. In fact, many of the senior management originated from Hitachi Semiconductor (e.g. CEO) should first be let go. After all, these group of managers were large in charge of Renesas Technology then and Renesas Electronics now. They didn't do much to put the 'house' in order. Instead, they let the 'house' rotten to what it is right now. Should they be held accountable? To those hard working Japanese employees who were laid off over the years, the answer is probably 'yes'.

Indeed. A new twist we now see in this reported proposal for the mega-merger is that Renesas' determination to keep its profitable MCU business to itself.
I do, however, question what 'system LSI' these three -- Renesas, Panasonic and Fujitsu Semi -- are planning to develop.
After all, much of the SoC business related to mobile products now belongs to Renesas Mobile.

Making "drastic cuts" will be painful for Renesas considering the company made pretty deep cuts following the NEC merger (6,000 people, I believe) and the fact that the company went through so much last year in the wake of the earthquake and tsunami.
But it sounds as though the mega-merger could still be in the works...